Tribunal rules in favor of appellant on service tax demand, citing revenue neutrality principle.

The Tribunal ruled in favor of the appellant, finding that the extended period for demanding service tax should not have been invoked. The appellant had paid service tax on their output services and argued that the tax amount demanded for services received from foreign companies should be allowed to be utilized for their output services. Citing a precedent, the Tribunal granted a waiver and stay against the recovery of the demanded service tax amount, emphasizing the principle of revenue neutrality in such cases.

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Issues:
1. Liability of service tax on services received from companies abroad.
2. Invocation of extended period for demand of service tax.
3. Applicability of revenue neutrality principle in tax liability cases.

Analysis:
1. The case involved a dispute regarding the liability of service tax on services received by the appellant from companies abroad, namely M/s. Netsaq, France, and M/s. Kapersky Lab, UK Ltd. The appellant was authorized to distribute their products and appoint sub-sellers in India. The authorities initiated proceedings alleging that the services provided by the foreign companies to the appellant fell under the category of 'Information Technology Software Services,' leading to the demand of service tax amounting to Rs.2,94,67,838 for the period from 16.5.2008 to 31.12.2010, along with penalties under Section 77 and Section 78 of the Finance Act, 1994.

2. The appellant contended that they had already paid Rs.65,03,320 within the normal period of limitation, and the entire demand was based on the premise that they received services from foreign companies without offices in India, making them liable under Section 66A of the Finance Act, 1994. The appellant argued that if the entire amount of service tax were to be paid, they should be allowed to utilize it for payment of service tax on their output services, for which they were already paying service tax.

3. The Tribunal considered the submissions and noted that the appellant had been compliant in paying service tax on the output services rendered by them in India. In light of the revenue neutrality situation, where the appellant could have utilized the paid service tax amount for their output services, the Tribunal accepted the appellant's claim that the extended period should not have been invoked. The Tribunal relied on its previous decision in the case of M/s. Wep Solutions (I) Ltd., where it was held that in situations of revenue neutrality, the extended period may not be invoked. Consequently, the Tribunal granted a waiver and stay against the recovery of the demanded service tax amount in this case as the entire tax for the normal period had already been paid.

This judgment highlights the importance of considering revenue neutrality and the utilization of paid service tax amounts in determining the applicability of the extended period for demand of service tax in cases involving services received from foreign companies.

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